The $45.5 billion Honda Motor Company of Japan clearly wants to ensure that it doesn't offend the Hero group, its two-wheeler joint venture partner in India. The Japanese company's senior managing director, K. Suzuki, visited India and met the Munjals of the Hero group in an effort to assuage feelings.

Mr Suzuki reiterated that the Japanese automobile major will not do anything that will affect its relations with Hero even after its wholly-owned subsidiary, Honda Motorcycle & Scooter India, becomes operational. The venture has recently received clearance from the Foreign Investment Promotion Board.

Mr Suzuki affirmed to the press in New Delhi that the two ventures in India will work in tandem on the basis of "prosperous co-existence" and not compete with each other on the same models. "Our competitors are not inside, they are outside," said Mr Suzuki.

A joint committee, with representation from Honda and the Hero group, has been set up to decide which model will be introduced by which company once the Honda subsidiary enters the motorcycle segment after five years. For the first five years Honda's wholly-owned subsidiary will make and market only scooters in India.

Honda is open to providing technical assistance to Hero Honda in the scooter segment if the Indian company chooses to enter this segment after five years. Honda is also not averse to the idea of offering the Hero group a stake in the new venture.

Honda's deputy chief operating officer for Asia Oceania Satoshi Toshida said, "As of now Honda will keep 100 per cent stake in the subsidiary. Honda actually does not stick to 100 per cent shareholding as partnerships are very important in operating in Asia. We are studying how and to what extent to give stake to any other company or companies. Since we already know the management style of the Hero group, we will consider giving a stake to the group." Honda owns 23 per cent of Hero Honda's equity.

Brijmohan Lall Munjal, chairman of Hero Honda Motor, responded to the offer, saying his group is open to taking an equity stake in the new venture. He also said he expects the Indian two-wheeler market to grow to about 10 million vehicles by 2010, and there is enough scope for both the companies to grow. He said there is a place for Honda because Hero Honda would not be in a position to meet the fast growing needs of the two-wheeler market.

Hero Honda intends to make one million two-wheelers a year by 2001-2002, to do which it will invest about Rs 300 crore. Mr Munjal said his company will concentrate on motorcycles for the time being.

Honda's new Indian venture will become a hub for its global two-wheeler business. It is projected to be fully operational by the second half of 2001. It plans to sell some 6 lakh vehicles in the first five years. The Japanese parent will invest Rs 183 crore in the subsidiary. Besides scooters, the company will make two-wheeler components, four-stroke engines for two-wheelers and three-wheelers, and their components.

Honda had exited its other collaborative venture in India, Kinetic Honda, a joint venture with the Pune-based Kinetic Engineering of the Firodias, by divesting its stake in favour of Kinetic Engineering. Honda has given an assurance to the FIPB that it will provide technological assistance to both Hero Honda and Kinetic Honda.